Buy-to-let mortgages increase 20pc

Buy-to-let is gaining popularity but lending is far off its peak, mortgage
experts say.

Buy-to-let lending has increased by nearly a fifth in the last year amid strong growth in the rental sector.

According to new figures from the Council of Mortgage Lenders (CML), more than 33,000 loans worth £3.9bn were advanced in the three months up to June, an increase of 18pc on the amount of cash advanced compared with the same period in 2011.

However, the CML warned that buy-to-let lending is still recovering from a low point in 2009 and lending volumes remain at about a third of their peak in 2007.

"Buy-to-let is continuing to show signs of recovery and growing broadly in line with expectations," said Paul Smee, director general at the CML.

"The rental sector has grown strongly over the last decade or so and buy-to-let continues to help deliver a wider choice for tenants."

Related Articles

The cost of rent has soared during the economic down turn as first-time buyers have remained trapped in the rental sector due to lack of a substantial deposit and lenders tightening up their criteria.

The cost of renting a home has risen by 4.3pc in the last year according to the latest survey from the Royal Institution of Chartered Surveyors. According to its figures, this trend looks set to continue with rents expected to continue to grow by 3.9pc over the next year, due to the problems affecting the sales market.

The upward march in rents continues to be underpinned by a shortage of good quality properties for tenants to move into. In the three months to July, the amount of new properties coming on to the market was little changed compared with the preceding period; a net balance of 2pc more surveyors reporting falls in new instructions to market.

However, the demand for quality rental properties among tenants is still very strong, said Matt Hutchinson, director of flat and house share website Spareroom.co.uk.

"With tenants renting for longer because they can't afford to climb onto the property ladder, or don't want to take on the financial burden of a hefty mortgage, there is a real paucity of existing rental stock coming come back onto the market," he said. "The knock-on effect is that there is more reliance on new rental stock becoming available."

According to the CML, despite the pressure on household budgets during the economic downturn, there has been a slight improvement in buy-to-let loan arrears.

The proportion of borrowers who are more than three months in arrears has fallen from 1.69pc at the end of March to 1.56pc by the end of June.

David Whittaker, managing director of Mortgages for Business, said: "Volumes are up, values are up and, even more encouragingly, arrears are down – a veritable podium of lending success."

Mr Whittaker said that this trend is likely to continue into the traditionally busier autumn period, which should set up the market well for the end of the year.

The share of buy-to-let properties which were repossessed remained stable at 0.12pc, compared with a slight fall in the proportion of owner-occupied homes which were repossessed, to 0.07pc.